Revenue...In the online billing and recurring billing domain, we focused our efforts to large...

―1―

Summary of Consolidated Financial Statements for the Second Quarter of FY2020 (IFRS)

May 12, 2020

Exchange: Tokyo Stock Exchange

Name of listed company: GMO Payment Gateway, Inc.

Stock code: 3769 URL: https://corp.gmo-pg.com/en/

Representative: Issei Ainoura President & Chief Executive Officer

Contact: Ryu Muramatsu Director, Executive Vice President Tel: +81-3-3464-0182

Scheduled submission date of quarterly report

May 13, 2019 Scheduled date of commencement for dividend payment

-

Supplemental materials prepared for financial results

Yes

Information meeting arranged related to financial results

Yes (for institutional investors and analysts)

(Amounts rounded down to the nearest million yen)

1. Consolidated Financial Statements for the Second Quarter, FY2020 (From October 1, 2019 to March 31, 2020)

(1) Consolidated Financial Statements (Cumulative) (Percentages represent year-on-year % change)

Revenue Operating

profit Profit before income taxes

Profit Profit attributable

to owners of parent

Total comprehensive

income

Mil. Yen % Mil. Yen % Mil. Yen % Mil. Yen % Mil. Yen % Mil. Yen %

Q2 FY2020 18,386 14.8 4,704 10.5 5,247 26.9 3,455 35.6 3,408 32.2 3,580 59.5

Q2 FY2019 16,015 27.5 4,258 30.2 4,134 30.0 2,549 31.0 2,578 31.4 2,244 △1.0

Basic earnings per

share Diluted earnings per

share

Yen Yen

Q2 FY2020 46.33 45.24

Q2 FY2019 35.05 34.32

(2) Consolidated Financial Position

Total assets Total equity Total equity

attributable to owners of parent

Total equity attributable to owners of parent to

total assets

Mil. Yen Mil. Yen Mil. Yen %

Q2 FY2020 159,194 28,486 27,428 17.2

FY2019 139,990 27,539 26,494 18.9

2. Dividends

Full-year dividend

End of Q1 End of Q2 End of Q3 Year-end Total

Yen Yen Yen Yen Yen

FY2019 0.00 0.00 0.00 36.00 36.00

FY2020 0.00 0.00

FY2020 (forecast) 0.00 42.00 42.00 (Note 1) Revision to the most recently released dividend forecast: No

3. Consolidated Financial Forecast for the Fiscal Year Ending September 2020 (From October 1, 2019 to September 30, 2020)

(Full year % represents previous term comparison; Interim % represents year-on-year change)

Revenue Operating profit Profit before income taxes

Profit Profit attributable to

owners of parent Basic earnings

per share

Mil. Yen % Mil. Yen % Mil. Yen % Mil. Yen % Mil. Yen % Yen

Full year 36,618 14.0 10,376 25.0 9,867 22.8 6,216 23.0 6,110 16.0 83.06 (Note) Revision of the most recently released financial forecast: No

―2―

Notices:

(1) Changes of important subsidiaries during the period (change of specific subsidiaries that leads to a change in the scope of consolidation): No

Number of new subsidiaries: - (Name: ); Number of excluded subsidiaries: - (Name: )

(2) Changes in the accounting policy / changes in the accounting estimation

[1] Changes in accounting policy required by IFRS.: Yes

[2] Changes in accounting policy other than [1]: No

[3] Changes in accounting estimations: No

(3) Number of shares issued (common stock)

[1] Number of shares issued at the end of the term (including treasury stock)

Q2 FY2020: 74,301,000 FY 2019: 74,301,000

[2] Number of treasury shares at the end of the term Q2 FY2020: 714,781 FY 2019: 739,281

[3] Average number of shares during the term Q2 FY2020: 73,573,232 Q2 FY2019: 73,562,665

(Note 1) Number of treasury shares at the end of the term above include the shares attributed to the directors’ remuneration board incentive plan trust and J-ESOP (734,205 shares for FY2019; 709,705 shares for Q2 FY2020.)

* These quarterly financial statements are not subject to the quarterly review procedures.

* Notes regarding the appropriate use of financial forecast and other important notes

1. The above forecasts are outlooks based on information currently available, and includes various uncertain factors. Actual performance may differ substantially from the forecasts due to changes in business conditions and other factors. For the assumption on which financial forecasts are based and matters to be considered in using financial forecasts, please refer to “(3) Review of consolidated earnings forecasts and other forecasts” under “1. Qualitative Information on Consolidated Financial Statements for the Quarter” on page 9 of the attachment.

2 Results Presentation for Investors and Analysts to be held on May 14, 2020. Supporting materials and a video of the presentation will be made available on the company's website after the event.

―3―

○ Table of contents of attachment

1. Qualitative Information on Consolidated Financial Statements for the Quarter 2

(1) Consolidated operating result 2

(2) Status of consolidated financial position 8

(3) Review of consolidated earnings forecasts and other forecasts 9

2. Condensed Consolidated Financial Statements and Major Notes 10

(1) Condensed consolidated balance sheet 10

(2) Condensed consolidated statement of income and comprehensive income 12

(3) Condensed consolidated statement of changes in equity 14

(4) Condensed consolidated statement of cash flows 15

(5) Notes regarding the going concern assumptions 17

(6) Notes regarding condensed consolidated financial statements 18

② Cash and cash equivalents 18

③ Operating and other receivables 18

④ Deposits to subsidiaries and affiliates 18

⑤ Material Subsequent Events 19

―4―

1. Qualitative Information on Consolidated Financial Statements for the Quarter

(1) Consolidated operating results

Forward-looking statements in the document are based on the judgement of the Group at the end of the quarter under

review.

① Consolidated operating results

The Group announces its earnings results for the cumulative second quarter of the consolidated fiscal year

(October 1, 2019 to March 31, 2020) as follows.

(Unit: Thousand yen)

Cumulative Q2 of the previous consolidated

fiscal year (From October 1, 2018

to March 31, 2019)

Cumulative Q2 of the current consolidated


to March 31, 2020)

Rate of change (%)

Revenue 16,015,927 18,386,666 14.8

Operating profit 4,258,091 4,704,341 10.5

Profit before income taxes 4,134,331 5,247,684 26.9

Profit attributable to owners

of parent 2,578,390 3,408,373 32.2

a. Revenue

The Group’s revenue reached to ¥18,386 mil., up by 14.8% YoY. The Payment Processing Business revenue

continued to grow thanks to the steady growth of E-Commerce (EC) market, coupled with the expansion of the

Group’s service coverage to non-EC operators. The Money Service Business (MSB) revenue grew from

favorable trends in transactions of GMO Payment After Delivery, a type of deferred payment service. The

Payment Enhancement Business revenue grew thanks to the growth at Macro Kiosk, the Group’s consolidated

subsidiary that provides SMS-based authentication and notification service.

Note that, it has been resolved at the Board of Directors meeting held on April 30, 2020 to transfer all the

shares of Macro Kiosk Berhad, a second-tier subsidiary held via a consolidated subsidiary, and has concluded

the transfer agreement on the same date. For details, please refer to ⑤ Material Subsequent Events of the (6)

Notes regarding condensed consolidated financial statements, found under 2. Condensed Consolidated

Financial Statements and Major Notes.

―5―

Revenue breakdown by business model is as follows.

(Unit: Thousand Yen)

Business model



to March 31, 2019)



to March 31, 2020)

Rate of change (%)

Initial (Initial revenue)

713,426 1,394,682 95.5

Stock (Fixed revenue)

2,411,444 2,777,546 15.2

Fee (Transaction processing revenue)

6,044,719 6,666,058 10.3

Spread (Merchant acquiring service revenue)

6,846,335 7,548,379 10.3

Total 16,015,927 18,386,666 14.8

b. Operating profit

Consolidated operating profit reached ¥4,704 mil., up by 10.5% YoY. Operating profit only grew by 10.5% YoY

despite the revenue growth of 14.8% YoY due to unfavorable comps against the previous second quarter which

benefited from a one-off decline in expenses from various corporate efforts to lower credit risks in the Money

Service Business segment, despite continued efforts to keep expense at low levels during the period under

review.

By segment, Payment Processing Business segment profit (operating profit) was ¥5,380 mil., up 13.9% YoY;

Money Service Business segment profit (operating profit) was ¥829 mil., a decline of 16.0% YoY; and, Payment

Enhancement Business recorded a segment profit (operating profit) was ¥54 mil. (previous second quarter was

a loss of ¥31 mil.). For details please refer to ② Results by segment of the (1) Consolidated operating results,

found under 1. Qualitative Information on Consolidated Financial Statements for the Quarter.

c. Profit before income taxes

Consolidated pre-tax profit reached ¥5,247 mil., up 26.9% YoY. The reason the pre-tax profit growth rate of

26.9% YoY was higher than the operating profit growth rate of 10.5% YoY, is due to gains on investment

partnerships of ¥223 mil. that increased the financial income to ¥244mil. (versus the previous second quarter

financial income of ¥25 mil.) and equity method investment gains of ¥421 mil. (versus the previous second

quarter equity method loss of ¥52 mil.).

―6―

② Results by segment

Performance by reportable segment is explained below.


Segment



to March 31, 2019)



to March 31, 2020)

Rate of change (%)

Payment Processing Business Revenue Operating profit

9,272,379 4,724,611

10,858,319 5,380,311

17.1 13.9

Money Service Business Revenue

Operating profit 3,833,603

987,978 4,364,228

829,669 13.8

△16.0

Payment Enhancement Business Revenue

Operating profit 2,909,943 △31,280

3,169,278 54,619

8.9 －

Adjustments Revenue

Operating profit －

△1,423,217 △5,160

△1,560,259 －－

Total Revenue Operating profit

16,015,927 4,258,091

18,386,666 4,704,341

14.8 10.5

a. Payment Processing Business

The payment processing business mainly consists of payment processing for online billing, recurring billing,

and, offline market, as well as support services to financial institutions and financial service providers.

In the online billing and recurring billing domain, we focused our efforts to large merchants and non-EC

operators given the secular growth in EC market. The segment revenue growth was driven by the strong

transaction volume growth of 35.4% YoY from increased transaction related to daily goods and digital contents

impacted by COVID-19, rising penetration of cashless payments and, expanding EC market.

Transaction value, on the other hand, grew only by 21.5% YoY due to the impact from the spread of COVID-19

that significantly affected some merchants with high-value transactions such as travel and ticket sales.

In the offline market, strong sales trend of payment terminals continued thanks to the high demand for IC chip-

embedded credit card terminals on the back of amendments to the Installment Sales Act. In addition, order

wins progressed favorably in the Unattended Market such as automated payment machines and ticket

machines.

As a result, segment revenues reached ¥10,858 mil., up 17.1% YoY and segment profit (operating profit) was

¥5,380 mil. up 13.9% YoY.

Note that segment revenues for Q2 standalone grew 21.2% YoY, much stronger than Q1

standalone growth rate of 13.2% YoY.

b. Money Service Business

Money Service Business (MSB) consists of Early Payment Service that help merchants improve cash flow

according to the merchant’s cash cycle needs; Transaction Lending Service that loans growth capital to

merchants based on their payment and other related data; Remittance Service; and GMO Payment After

Delivery offered by consolidated subsidiary GMO Payment Service, Inc.

In the cumulative Q2 period under review, GMO Payment After Delivery grew steadily despite some merchants

that were adversely affected by spread of COVID-19. In addition, services such as lending to overseas

operators and GMO B2B Early Payment and GMO AR Guarantee also grew. On the other hand, both

Remittance service and Early Payment service posted a YoY decline despite efforts to offset the negative

impact from a few merchants in the previous term.

The Electronic Invoice Early Payment service was launched on January 2020, which offers a one-click

payment of invoices to business users (i.e. sellers who issue invoices) on the B2B Platform Invoicing, a

―7―

platform to digitalize invoices operated by Infomart Corporation.

As a result, segment revenue reached ¥4,364 mil., up 13.8% YoY and segment profit (operating profit) reached

¥829 mil., a decline of 16.0% YoY due to the decline of few services and unfavorable comps against the

previous second quarter which benefited from a one-off decline in expenses resulting from corporate efforts to

lower credit risks despite efforts to control expense levels even after this one-off reduction.

c. Payment Enhancement Business

Payment Enhancement Business comprises of mobile payment services and authentication and notification

services via SMS (the “the EMS business”), provided by our consolidated subsidiary Macro Kiosk Berhad, and

the online advertising service.

In the consolidated Q2 under review, Macro Kiosk Berhad’s revenue grew only 12.6% YoY, resulting in segment

revenue of ¥3,169 mil. (up 8.9% YoY) and segment profit (operating profit) of ¥54 mil. (compared to operation

loss of ¥31 mil. in the previous Q2.

Note that, it has been resolved at the Board of Directors meeting held on April 30, 2020 to transfer all the

shares of Macro Kiosk Berhad, a second-tier subsidiary held via a consolidated subsidiary, and has concluded

the transfer agreement on the same date. For details, please refer to ⑤ Material Subsequent Events of the (6)

Notes regarding condensed consolidated financial statements, found under 2. Condensed Consolidated

Financial Statements and Major Notes.

Please see below for the table of the major businesses and companies providing these businesses by segment.

Segment Major service Major companies of the services

Payment

Processing

Business

Payment processing service

(Online billing and recurring billing)

GMO Payment Gateway, Inc.

GMO Epsilon, Inc. (consolidated subsidiary)

Payment processing service

(Offline payment) GMO Financial Gate, Inc. (consolidated subsidiary)

Money Service

Business

GMO Payment After Delivery GMO Payment Service, Inc. (consolidated

subsidiary)

Remittance service GMO Payment Gateway, Inc.


Transaction lending GMO Payment Gateway, Inc.


Early Payment service GMO Payment Gateway, Inc.


Payment

Enhancement

Business

Mobile payment, authentication

and notification Macro Kiosk Berhad (consolidated subsidiary)

―8―

(2) Status of consolidated financial position

① Assets, liabilities and net assets

a. Assets

Total assets at the end of the consolidated second quarter under review increased by ¥19,203 mil. from the end

of the previous fiscal year to reach ¥159,194 mil. This is mainly due to an increase in cash and cash

equivalents of ¥10,293 mil., an increase in advance payment of ¥1,033 mil., and an increase in accrued

revenues of ¥3,010 mil. and the increase of tangible fixed assets of ¥3,385 mil.

The Group has ¥1,800 mil. in deposits made to subsidiaries and affiliated companies included in the balance of

cash and cash equivalents at the end of the consolidated second quarter under review, as stated in ② Cash

and cash equivalents of (6) Notes regarding condensed consolidated financial statements. Together with the

¥5,000 mil. of deposits to subsidiaries and affiliated companies stated in the condensed consolidated balance

sheet, the total balance of the Group’s deposits to subsidiaries and affiliated companies stands at ¥6,800 mil.

These deposits comprise the available cash on hand that is managed by GMO Internet’s cash management

system (CMS) and available to the entire Group. As a result, this allows the GMO-PG Group to withdraw

necessary funds according to our business developments by registering a request taking into account the

designated number of days prior to when cash is needed, without the need to wait until the CMS maturity date.

b. Liabilities

Balance of liabilities at the end of the consolidated second quarter under review stood at ¥130,707 mil., an

increase of ¥18,256 mil. from the end of the previous consolidated fiscal year, mainly due to an increase in

accrued expenses of ¥2,142 mil., deposits received of ¥13,101 mil. and the increase in other financial liabilities

of ¥3,316 mil.

c. Equity

Equity balance at the end of the consolidated second quarter under review was ¥28,486 mil., an increase of

¥947 mil. from the end of the previous consolidated fiscal year. This was mainly due to the increase in net profit

of ¥3,455 mil. and other comprehensive profit of ¥125 mil., which was partially offset by the decline in retained

earnings of ¥2,648 mil. from dividend payouts.

② Status of consolidated cash flows

Cash and cash equivalents (“funds”) at the end of the consolidated second quarter under review increased by

¥10,293 mil. versus the balance at the start of the term, to ¥62,306 mil. The state of cash flows over the

cumulative second quarter under review is discussed below.

a. Cash flow from operating activities

Net funds provided by operating activities over the consolidated second quarter under review amounted to

¥16,379 mil., which compares to ¥3,839 mil. in the same period of the previous year. This resulted from cash

outflows of (i) increase in advances paid of ¥1,033 mil., (ii) increase in accrued revenues of ¥2,943 mil., (iii)

corporate and income tax payment of ¥1,793 mil. which partially offset the cash inflows of (i) profit before tax of

¥5,247 mil., (ii) increase in accrued expenses of ¥2,175 mil., and (iii) increase in deposits received of ¥13,101

mil.

b. Cash flow from investing activities

Net funds used by investing activities over the consolidated second quarter under review totaled ¥1,831 mil.,

which compares to ¥61,656 mil. in the same period of the previous year. This is due to cash outflow of ¥766 mil.

from acquisition of intangible assets and ¥909 mil. from purchase of investment securities.

c. Cash flow from financing activities

Net funds used by financing activities over the consolidated second quarter under review was a ¥4,246 mil.,

which compares to ¥2,574 mil. in the same period of the previous year, due to net reduction of short-term

borrowings of ¥1,000 mil. and dividend payout of ¥2,647 mil.

―9―

(3) Review of consolidated earnings forecasts and other forecasts

The Group’s core business is positioned within the EC market in Japan, and Japan’s B2C EC market for

merchandizing continues to grow very rapidly, helped by favorable externalities such as increased penetration of

smartphone and reforms in the logistic/distribution industry. At the same time, the scope of EC market itself is

expanding from the online migration of B2B and C2C transactions. We are committed to achieving over 25%

operating profit growth in the medium to long term by focusing on FinTech in the Money Service Business (MSB)

segment, on IoT in the offline market and on global expansion as well.

Note that, it has been resolved at the Board of Directors meeting held on April 30, 2020 to waive all claims and to

transfer all the shares of Macro Kiosk Berhad held via a consolidated subsidiary, and has concluded the transfer

agreement on the same date. For details, please refer to ⑤ Material Subsequent Events of the (6) Notes regarding

condensed consolidated financial statements, found under 2. Condensed Consolidated Financial Statements and

Major Notes. As a result, revenues are forecast to fall short of the earnings guidance provided on November 12, 2019,

however, the earnings guidance does not include this impact as the amount of impact to consolidated financial

statements is undetermined at present.

Regarding the impact from the spread of COVID-19, business activities have been switched to remote work from

home from January 27, 2020, and we have not experienced any noticeable decline in productivity or efficiency due to

this. Regarding the impact to our financial performance, the nature of online business makes it resilient although

private consumption itself may stagnate. Along with the offline-to-online trend in the offline market, the overall impact

to GMO-PG group’s revenues is minimal at present.

Earnings guidance announced on November 12, 2019 for the Fiscal Year ending September 2020 is as follows.

(Unit: Yen Million)

Forecast for Fiscal Year ending September 2020 Rate of change (%)

Revenues 36,618 14.0

Operating Profit 10,376 25.0

Profit Before Tax 9,867 22.8

Profit 6,216 23.0

Profit Attributable to Owners of Parent 6,110 16.0

―10―

2. Condensed Consolidated Financial Statements and Major Notes

(1) Condensed consolidated balance sheet


Notes End of previous consolidated

fiscal year

(September 30, 2019)

End of Q2 of current consolidated fiscal year

(March 31, 2020)

Assets

Current assets

Cash and cash equivalents ② 52,013,447 62,306,643

Operating and other receivables ③ 13,663,112 13,326,210

Advances paid 32,496,862 33,530,110

Accrued revenue 21,566,393 24,577,323

Inventories 207,280 216,803

Deposits to subsidiaries and affiliates ④ － 5,000,000

Other financial assets 165,584 176,915

Other current assets 956,398 959,760

Total current assets 121,069,081 140,093,766

Non-current assets

Tangible assets ① 517,509 3,903,471

Goodwill and other intangible assets 4,359,129 4,682,854

Investments accounted for using equity method

3,001,692 3,751,694

Deposits to subsidiaries and affiliates ④ 5,000,000 －

Other financial assets 4,803,089 5,595,751

Deferred Tax Assets 1,124,014 1,042,005

Other non-current assets 116,082 124,785

Total non-current assets 18,921,518 19,100,561

Total assets 139,990,599 159,194,328

―11―


Notes End of previous consolidated

fiscal year



(March 31, 2020)

Liabilities and Equity

Liabilities

Current liabilities

Operating and other payables 4,688,856 5,335,759

Accrued expenses 16,118,112 18,260,687

Deposits received 50,834,374 63,935,762

Borrowings 15,800,400 14,800,400

Other financial liabilities ① 108,534 424,490

Income taxes payable, etc. 1,569,616 1,591,753

Provisions 396,631 528,946

Other current liabilities 2,229,923 2,437,462

Total current liabilities 91,746,449 107,315,262

Non-current liabilities

Corporate bonds 16,745,648 16,780,102

Borrowings 1,398,700 998,500

Other financial liabilities ① 223,363 3,223,468

Provision 35,848 129,677

Deferred tax liabilities 85,604 73,253

Other non-current liabilities 2,215,686 2,187,712

Total non-current liabilities 20,704,851 23,392,714

Total liabilities 112,451,301 130,707,976

Equity

Capital stock 4,712,900 4,712,900

Capital surplus 5,847,480 5,956,527

Retained earnings ① 15,884,444 16,573,141

Treasury stock △1,181,846 △1,149,341

Other items of equity 1,231,655 1,335,462

Total equity attributable to owners of parent

26,494,633 27,428,689

Non-controlling interests ① 1,044,664 1,057,661

Total equity 27,539,297 28,486,351

Total liabilities and equity 139,990,599 159,194,328

―12―

(2) Condensed consolidated statement of income and consolidated statement of comprehensive income

Condensed consolidated statement of income


Notes

Cumulative Q2 of previous consolidated fiscal year (From October 1, 2018

to March 31, 2019)

Cumulative Q2 of current consolidated fiscal year (From October 1, 2019

to March 31, 2020)

Revenue 16,015,927 18,386,666

Cost of revenue △5,811,604 △6,615,569

Gross profit 10,204,322 11,771,096

Other income 73,939 95,002

Selling, general and administrative expenses

△5,890,733 △7,012,262

Other expense △129,436 △149,495

Operating profit 4,258,091 4,704,341

Financial income 25,851 244,851

Financial expense △96,775 △122,565

Equity method investment gains or loss △52,835 421,058

Profit before income taxes 4,134,331 5,247,684

Income tax expenses △1,585,183 △1,792,230

Profit 2,549,148 3,455,453

Profit attributable to

Owners of parent 2,578,390 3,408,373

Non-controlling interests △29,242 47,080

Profit 2,549,148 3,455,453

Earnings per share

Basic earnings per share (yen) 35.05 46.33

Diluted earnings per share (yen) 34.32 45.24

―13―

Condensed consolidated statement of comprehensive income


Notes


to March 31, 2019)


to March 31, 2020)

Profit 2,549,148 3,455,453

Other comprehensive income

Items that will not be reclassified to profit or loss

Fair value of financial assets measured through other comprehensive income

△287,897 △160,035

Shares of other comprehensive income of equity method affiliates

△42,986 238,696

Total of Items that will not be reclassified to profit or loss

△330,883 78,661

Items that will be reclassified to profit or loss

Exchange differences on translation of foreign operations

△11,396 △57,720

Shares of other comprehensive income of equity method affiliates

37,894 104,139

Total of items that will be reclassified to profit or loss

26,497 46,418

Other comprehensive income after income taxes

△304,386 125,080

Comprehensive income 2,244,762 3,580,534

Comprehensive income attributable to

Owners of parent 2,274,065 3,538,305

Non-controlling interests △29,303 42,228

Total 2,244,762 3,580,534

―14―

(3) Condensed consolidated statement of changes in equity

Cumulative second quarter of the previous consolidated fiscal year (From October 1, 2018 to March 31, 2019)


Notes Capital stock

Capital surplus

Retained earnings

Treasury

stock

Other items of equity

Total equity attributable to owners of parent

Non-

controlling interests

Total

assets

Balance as of October 1, 2018

4,712,900 5,758,448 12,875,446 △491,893 1,941,305 24,796,206 1,223,811 26,020,018

Cumulative effects of accounting changes

－－ △195,085 －－ △195,085 － △195,085

Restated Balance 4,712,900 5,758,448 12,680,361 △491,893 1,941,305 24,601,121 1,223,811 25,824,933

Profit －－ 2,578,390 －－ 2,578,390 △29,242 2,549,148


－－－－ △304,324 △304,324 △61 △304,386

Quarterly comprehensive income

－－ 2,578,390 － △304,324 2,274,065 △29,303 2,244,762

Purchase of treasury stock

－－－ △689,952 － △689,952 － △689,952

Dividends －－ △2,136,041 －－ △2,136,041 － △2,136,041

Share-based payment transaction

－ 34,818 －－－ 34,818 15,491 50,310

Total transactions with owners

－ 34,818 △2,136,041 △689,952 － △2,791,175 15,491 △2,775,683

Balance as of March 31, 2019

4,712,900 5,793,266 13,122,711 △1,181,846 1,636,980 24,084,012 1,209,999 25,294,011

Cumulative second quarter of the current consolidated fiscal year (From October 1, 2019 to March 31, 2020)


Notes Capital stock

Capital surplus

Retained earnings

Treasury

stock

Other items of equity

Total equity

attributable to owners of parent

Non-controlling interests

Total

assets

Balance as of October 1, 2019

4,712,900 5,847,480 15,884,444 △1,181,846 1,231,655 26,494,633 1,044,664 27,539,297

Cumulative effects of accounting changes

① －－ △97,243 －－ △97,243 △38,971 △136,214

Restated Balance 4,712,900 5,847,480 15,787,200 △1,181,846 1,231,655 26,397,389 1,005,692 27,403,082

Profit －－ 3,408,373 －－ 3,408,373 47,080 3,455,453


－－－－ 129,932 129,932 △4,851 125,080

Quarterly comprehensive income

－－ 3,408,373 － 129,932 3,538,305 42,228 3,580,534

Disposal of treasury stock

－ 33,085 － 32,504 － 65,590 － 65,590

Dividends －－ △2,648,221 －－ △2,648,221 － △2,648,221

Transfer from other components of equity to retained earnings

－－ 25,788 － △25,788 －－－

Changes in the interests in controlled subsidiary

－ △9,528 －－－ △9,528 － △9,528

Share-based payment transaction

－ 85,490 －－ △22 85,468 9,740 95,208

Other increase/decrease －－－－ △313 △313 － △313

Total transactions with owners

－ 109,047 △2,622,433 32,504 △26,125 △2,507,006 9,740 △2,497,265

Balance as of March 31, 2020

4,712,900 5,956,527 16,573,141 △1,149,341 1,335,462 27,428,689 1,057,661 28,486,351

―15―

(4) Condensed consolidated statement of cash flows


Notes


to March 31, 2019)


to March 31, 2020) Net cash provided by (used in) operating activities

Profit before income taxes 4,134,331 5,247,684

Depreciation & Amortization 525,842 734,761

Impairment Loss － 89,272

Financial income and expense 70,924 △122,285

Equity method investment loss 52,835 △421,058

Increase/decrease in inventories (△=increase)

9,711 △9,523

Increase/decrease in operating and other receivables (△=increase)

1,447,643 305,239

In/Decrease in advances paid (△=increase)

△4,143,402 △1,033,247

Accrued revenues (△=increase) △2,856,782 △2,943,858

In/Decrease in operating payables (△=decrease)

112,446 682,440

In/Decrease in accrued expenses (△=decrease)

△1,085,264 2,175,539

In/Decrease in deposits received (△=decrease)

6,969,499 13,101,268

In/Decrease in provisions 356,219 132,314

Other △207,871 292,335

Subtotal 5,386,134 18,230,884

Interest and dividends received 25,851 20,990

Interest paid △22,441 △78,697

Increase in Deposits △59,940 －

Income taxes paid/refunded △1,490,051 △1,793,330

Net cash provided by (used in) operating activities

3,839,552 16,379,846

Net cash provided by (used in) investing activities

Payment from time deposits 689,374 －

Purchase of property, plants and equipment

△72,668 △349,008

Purchase of intangible assets △568,789 △766,698

Purchase of investment securities △101,562 △909,028

Proceeds from sales and redemption of investment partnerships

110,805 297,233

Acquisition of other financial assets △89,401 △101,937

Proceeds from sales of other financial assets

7,262 49,387

Others △36,677 △50,986

Net cash provided by (used in) investing activities

△61,656 △1,831,038

―16―


Notes


to March 31, 2019)


to March 31, 2020) Net cash provided by (used in) financing activities

In/decrease in short-term borrowings 699,000 △1,000,000

Repayment of long-term borrowings △400,200 △400,200

Payment for stock buyback △689,952 －

Dividends paid △2,133,237 △2,647,589

Other △50,376 △198,212

Net cash provided by (used in) financing activities

△2,574,766 △4,246,002

Effect of exchange rate changes on cash and cash equivalents

△33,884 △9,609

In/decrease in cash and cash equivalents (△=decrease)

1,169,245 10,293,195

Balance of cash and cash equivalents at the beginning of the period

② 42,033,124 52,013,447

Cash and cash equivalents at the end of period

② 43,202,369 62,306,643

―17―

(5) Notes regarding the going concern assumptions

None.

―18―

(6) Notes regarding condensed consolidated financial statements

② Cash and cash equivalents

Breakdown of cash and cash equivalents are as follows.


End of previous consolidated

fiscal year



(March 31, 2020)

Cash and cash equivalents 49,213,447 60,506,643

Deposits to subsidiaries and affiliates

2,800,000 1,800,000

Total 52,013,447 62,306,643

③ Operating and other receivables

Breakdown of operating and other receivables are as follows.


End of previous consolidated

fiscal year



(March 31, 2020)

Accounts receivable - trade 5,663,939 6,217,804

Operating loans 7,514,754 6,690,051

Other 590,916 526,030

Allowance for doubtful accounts

△106,498 △107,676

Total 13,663,112 13,326,210

④ Deposits to subsidiaries and affiliates

Deposits to subsidiaries and affiliates are the deposits managed under the CMS (cash management system) of GMO

Internet Group.

―19―

⑤ Material Subsequent Events

(Waiver of claims to subsidiary and transfer of subsidiary shares)

GMO Payment Gateway, Inc. (GMO-PG) has resolved at the Board of Directors meeting held on April 30, 2020 to

waive claims (“the Waiver”) to Macro Kiosk Berhad (Macro Kiosk) and have also resolved to transfer all the shares

held through our subsidiary (“the Transfer”) and have concluded the transfer agreement on the same date. As a

result of the Transfer, Macro Kiosk will be deconsolidated from the consolidated financial statements.

a. Reasons for the Transfer and Waiver

GMO-PG group acquired the shares and consolidated Macro Kiosk on August 2016 in order to expand our

comprehensive payment services globally, and we have pursued business expansion mainly centered in

Southeast Asia.

Macro Kiosk steadily grew by expanding its competitive services offered in Malaysia to the neighboring emerging

markets. However, changes in the competitive landscape and market conditions have made it difficult to achieve

the medium-term plans formulated at the time of the acquisition. As a result, we recorded an impairment loss of

the entire book value of goodwill, technical assets, software and customer-related assets in the Fiscal Years

ending September 2018 and 2019.

Despite reviewing the growth strategy of Macro Kiosk, we now foresee a prolonged time to generate synergy

benefits making it and it is difficult to formulate a medium term plan that could achieve management’s KPI target

of 25% operating profit growth, foresee a cashflow improvement and a resolution to the negative capital situation,

due the earnings deterioration and changes in market conditions that were unforeseeable at the time of

acquisition in August 2016. Thus, we could not negate the possibility of further cash injections. In addition, the

spread of COVID-19 in Malaysia and throughout Asia from January 2020 and the resulting widespread recession

have materially increased uncertainty and risks that are difficult to control. Following a broad assessment of these

factors, the decision was made to transfer all the shares of Macro Kiosk to the three founding members and

current management of Mr. Goh Chee Ken, Mr. Goh Chee Heng and Mr. Goh Chee Seng.

Pursuant to the Transfer, all claims to Macro Kiosk from GMO-PG are to be waived.

b. Outline of the recipient of the Transfer

(i) Goh Chee Ken

① Name Goh Chee Ken

② Address State of Selangor, Malaysia

③ Relationship with the listed company Director of Macro Kiosk

(ii) Goh Chee Heng

① Name Goh Chee Heng



(iii) Goh Chee Seng

① Name Goh Chee Seng



―20―

c. Schedule

(i) Date of Resolution and

Conclusion of Agreement of Transfer of Shares April 30, 2020

(ii) Transfer of Shares and Waiver of Claims After May 2020 (Planned)

d. Outline of consolidated subsidiary to be transferred: Macro Kiosk

Company Name Macro Kiosk Berhad

Business Description SMS mobile solution business, Carrier billing business

Business Relationship Between GMO-

PG and Macro Kiosk

GMO-PG provides loans to Macro Kiosk

e. Number of shares to be transferred, transfer price and share ownership before and after the Transfer

Number of shares held before

the Transfer

3,500,000shares (Voting rights: 3,500,000 units;

ownership ratio 70%）

Number of shares to be

transferred 3,500,000 shares

Number of shares held after the

Transfer

0 shares

(Voting rights: 0 units, ownership ratio: 0%)

(Note) The transfer price is undisclosed due to confidentiality agreements with the recipient. The transfer

price was determined through discussions with the recipient, following thorough assessment of the

validity of the transfer price that took into consideration the current negative capital situation and

estimated decline in future profitability of Macro Kiosk.

f. Contents of the Waiver

Type of claim Loans and Accrued Interest

Value of claims to be waived Approximately ¥1.0 billion

g. Reported segment which includes Macro Kiosk

Payment Enhancement Business segment.

h. Future Outlook

The estimated impact to consolidated profit and loss statement for Fiscal Year ending September 2020 is

as follows: a ¥300 mil. reduction to Operating Profit from recording a loss on sale of subsidiary shares and,

a ¥600 mil. reduction to Profit Attributable to Owners of the Parent due to waiver of claims of approximately

¥1.0 bn which caused some of Macro Kiosk’s profit to be reclassified as their minority interest.

Note that due to COVID-19, the exact date of the Transfer cannot be determined and there is a likelihood

―21―

that transfer proceedings could take more time than usual. The amounts related to the Transfer and the

Waiver have been assumed to occur by the end of March 2020.

In addition, Macro Kiosk will be excluded from the scope of consolidation due to the Transfer, however

given the undetermined date of the Transfer, the amount from this impact has not been confirmed.

Revenue...In the online billing and recurring billing domain, we focused our efforts to large...

Documents

Transcript of Revenue...In the online billing and recurring billing domain, we focused our efforts to large...